Lecture Notes on Free Trade and Protectionism

Introduction

• Free trade is often considered a pathway to prosperity, yet recent political developments question this notion.
• Example: Trump’s call for duties on steel imports and rising tensions with Europe and China.
• Discussion surrounding the implications of protectionism and isolationism.

Global Trade Dynamics

• Key Concept: Millions of tons of goods in motion across the globe.
• Free trade is touted for prosperity but is riddled with contradictions.
• Germany's position: High exports, yet it relies heavily on imports, creating a complex interdependence.

The Role of Germany and the EU

• Germany is a leading exporter but faces criticism for not buying from abroad.
• EU acts as a dominant player in global trade, often seen as a “Goliath.”
• Free trade may destroy livelihoods both at home and abroad despite claims of its benefits.

Import Duties and Customs

• The Port of Hamburg: Major gateway for imports, especially from China.
  • Example: Cars taxed at 10%, clothing at 12%.
  • Many products face complex customs duties, creating loopholes.
• Customs agents work to ensure proper declaration of goods, revealing issues with classification and duties.

Case Study: Bicycle Manufacturing

• Example of Wolfgang Renner’s bicycle company:
  • Bikes assembled in Taiwan from frames made in China.
  • EU imposes tariffs to protect local manufacturing.
  • Chinese competition challenges European producers, leading to protective tariffs.
• Import Tariffs:
  • Protects domestic jobs by making imported goods more expensive.
  • Example: Chinese bikes face punitive tariffs; production is rerouted to evade these tariffs.

Impact of Free Trade on Local Industries

• U.S. bike industry example: Job loss due to flooding of inexpensive Chinese imports.
• Local businesses struggle to compete without similar protective measures.

Economic Imbalances

• Professor Herbert Dieter’s Perspective:
  • Germany’s trade surplus creates deficits in other nations, contributing to global economic imbalance.
  • The U.S. and Germany have different experiences with trade surpluses and deficits.
• Statistics:
  • Germany’s exports in 2017: 1.2 trillion euros, trade surplus of 250 billion euros.
  • U.S. trade deficit: Around 500 billion dollars.

The Dilemma of Protectionism vs. Free Trade

• Personal accounts from workers in affected industries reveal the complexity and human cost of globalization.
• Manfred Schmidt’s Story:
  • Job insecurity due to potential factory relocation.
• Economic benefits of free trade often come at the expense of local employment and job security.

Consumer Choices and Nationalism

• Sarah Parker’s Initiative:
  • Advocates for buying American-made products to support local jobs.
  • Highlights the often hidden origins of commonly purchased goods.
• The discussion of how consumer choices reflect nationalistic trends versus global interconnectedness.

Historical Context

• Brief history of global trade and protectionism from the 20th century.
  • The Great Depression led to significant protectionist policies.
  • Historical examples illustrate the cyclical nature of protectionism and global trade dynamics.

Protectionism in Modern Trade Agreements

• Examples of protectionist measures taken by the EU to shield local industries from cheaper imports, primarily from China.
• Cameroon Case Study:
  • European onion imports have devastated local agriculture, leading to a call for protective tariffs.
• The struggle between maintaining local agricultural markets and adhering to free trade agreements.

The Ethics of Global Trade

• Discussion on whether free trade truly benefits all or primarily supports wealthier nations and corporations.
• Critique of the World Trade Organization (WTO) and its policies favoring developed nations.
• Francisco Mari’s Perspective:
  • Advocates for domestic market protection until local industries can compete.

Conclusion

• The current model of global trade is flawed and favors wealthy nations while undermining local economies in developing countries.
• True free trade is deemed a myth; without protectionism, fair trade principles cannot be upheld.
• Ongoing global protests indicate a rising awareness and demand for equitable trade practices.